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The Politics of Institutional Learning and Creation: Bank Crises and Supervision in East Central Europe

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  • Gerald A. McDermott

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    Abstract

    This article examines the political conditions shaping the creation of new institutional capabilities. It analyzes bank sector reforms in the 1990s in three leading postcommunist democracies – Hungary, Poland, and the Czech Republic. It shows how different political approaches to economic transformation can facilitate or hinder the ability of relevant public and private actors to experiment and learn their new roles. With its emphasis on insulating power and rapidly implementing self-enforcing economic incentives, the “depoliticization” approach creates few changes in bank behavior and, indeed impedes investment in new capabilities at the bank and supervisory levels. The “deliberative restructuring” approach fostered innovative, costeffective monitoring structures for recapitalization, a strong supervisory system, and a stable, expanding banking sector.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp726.pdf
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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp726.

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    Length: pages
    Date of creation: 01 Nov 2004
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    Handle: RePEc:wdi:papers:2004-726

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    Keywords: Institutional change; transition economies; bank crises; bank supervision; learn;

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    1. Barth, James R. & Caprio Jr, Gerard & Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
    2. Helper, Susan & MacDuffie, John Paul & Sabel, Charles, 2000. "Pragmatic Collaborations: Advancing Knowledge While Controlling Opportunism," Industrial and Corporate Change, Oxford University Press, vol. 9(3), pages 443-87, September.
    3. Reuven Glick & Ramon Moreno & Mark Spiegel, 2001. "Financial crises in emerging markets," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue mar.23.
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    7. International Monetary Fund, 2001. "Republic of Poland," IMF Staff Country Reports 01/67, International Monetary Fund.
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    12. Caprio, Gerard Jr. & Klingebiel, Daniela, 1996. "Bank insolvencies : cross-country experience," Policy Research Working Paper Series 1620, The World Bank.
    13. Anderson, Ronald W. & Kegels, Chantal, 1998. "Transition Banking: Financial Development of Central and Eastern Europe," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198290131, October.
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    15. Anna Meyendorff & Anjan V. Thakor (ed.), 2002. "Designing Financial Systems in Transition Economies: Strategies for Reform in Central and Eastern Europe," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262133911, December.
    16. John P. Bonin & Bozena Leven, 2000. "Can Banks Promote Enterprise Restructuring?: Evidence From a Polish Bank's Experience," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 294, William Davidson Institute at the University of Michigan.
    17. Haggard, Stephan & Maxfield, Sylvia, 1996. "The political economy of financial internationalization in the developing world," International Organization, Cambridge University Press, Cambridge University Press, vol. 50(01), pages 35-68, December.
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